A man casts his fishing rod into the Jialing River in Chongqing. (Reuters)

In recent years, the Chinese central government has been viewed as an example of fiscal health. As of the end of 2012, the total worth of the issued
national bonds was 8.27 trillion RMB, which was equal to 15.9 percent of the country's annual GDP. In 2013, the budgeted deficit of the central government is 850
billion RMB, 14.2 percent of budgeted revenue. Yet those numbers tell only one side of the story. Despite the good standing of the central government's budget,
the expanding scale of local government debts has been a source of concern in the media and academia.

On June 10, the National Audit Office released the audit report on local government debts. It selected 36 administrative entities -- 15 provinces, their
capital cities, three municipal cities and one district from each municipal city -- and audited their debts over the course of four months. The report
offers a glimpse into the fiscal dilemma that many of China's local authorities are facing.

What do the numbers say?

In the end of 2012, all debts borrowed by the 36 local governments totaled 3.85 trillion RMB, including the debts that governments are directly responsible
for repaying, those in which the governments act as the guarantor, and other debts of an unspecified nature (see Figure 1). In 2011 and 2012, those
authorities managed to repay 39.1 percent of all left-over debts, while borrowing more heavily than before (see Figure 2). Thus, the overall scale of local
government debt grew until 2012 exceeds that of 2010 by 12.9 percent.

Of the 36 political entities audited, sixteen have a debt ratio (the ratio of total debts to its fiscal capability) of over 100 percent, the most indebted having
a ratio of 219.6 percent. Moreover, the pressure from this is urgent. In 2012, the debt-service ratios (the ratio of total debt due in 2012 to an entity's fiscal
revenue in 2012) of twenty administrative units were higher than 20 percent, the highest being 67.7 percent, suggesting that a considerable portion of the year's fiscal
income was used to repay debts.

This audit report only sampled provincial and high-level township governments, most of which are located in the economically stronger eastern part of
China. Thus, most of the audited governments are more financially sound and have lighter burdens of expenditure than the average local government in China,
which means the debt problem may be even more severe than the report reveals.

Until 2008, most local governments used to borrow under their own name. However, this practice has several drawbacks for local authorities. First, bank
loans borrowed are subject to supervision by upper level authorities, which demand high levels of transparency. More importantly, this method of borrowing
may prevent local governments from issuing local bonds. From 1995 to 2009, the Budget Law prohibited local governments from issuing bonds. In 2009, the
central government legalized local bonds, but the bonds issued by any local authority needed to be approved and controlled by the National Treasury
Ministry.

Due to the inconveniences mentioned above, nowadays, most local governments prefer an alternative way of financing - namely, through "local financing
platforms." Those "platforms" are state-owned companies founded by local governments, who transfer fiscal revenues and land reserves to those companies as
their initial assets. When their registered assets exceed a certain amount, the financing companies enjoy substantial freedoms in borrowing from banks or
issuing corporate bonds. Those loans and bonds are usually guaranteed by future fiscal revenues or income from land-selling. In these days, almost all
local governments utilize financing platforms, instead of borrowing directly, as their primary way of introducing capital (see Figure 3). The 36 local
authorities audited in the aforementioned report have 223 affiliated financing companies.

Although financing companies are expected to become financially self-sustainable by investing in infrastructure projects and running them for profit, a
large proportion of them have fallen into a financial black hole. According to the audit report, among the 223 financing companies, 68 have a debt ratio
over 70 percent. 53.7 percent of the total debt that was repaid by the 223 companies in 2012 was actually repaid with fiscal revenue or new loans.

Undoubtedly, bank loans and bonds are the two major types of government debt (see Figure 4).Governments also seek new financial resources through trust
loans, financial leasing, sale-leasebacks, build-transfers and other informal bonds, which are all illegal. These debts made up 15.8 percent of new debt from
money borrowed by 36 local authorities in 2011 and 2012. Compared to bank loans and bonds, these practices are less transparent and harder to supervise.

The traditional explanation for the over-borrowing of local governments traces the phenomenon to the 1994 tax reform, which redefined the central-local
fiscal balance. In the 1980's and early 1990's, tax collection was relegated to the local level, which kept most of the revenue. In 1994, the central
government built a top-down system of its own to collect taxes directly, and appropriated most of the revenue. While local governments lost their major
source of income, they remained responsible for paying for most major welfare programs. Thus, projected welfare expenditures exceeded potential revenue,
driving local governments to borrow heavily.

Yet this explanation is neither sufficient nor accurate. Although most state revenues are channeled to the central government, the
central government transferred a huge amount of money to local authorities to cover their expenses
(this practice is called "transfer payments"). In 2013, money reallocated from the central to provincial authorities will account for 70.2 percent of total
budgeted spending of the central government. With the transferred payments, the local governments should have been able to keep their deficits at a very
low level.

For local governments, the real deficit booster has been infrastructure investment. In 2011, a research paper by scholars at Beijing Normal University and Peking University
argued that county-level governments had a "productive expenditure bias" -- that is, authorities are much more willing to spend on programs that directly
stimulate economic production, especially infrastructure, than on welfare and public service programs. Nowadays, economic performance is still used as a
major criterion for the evaluation and promotion of local bureaucrats, while fiscal health is paid no attention during the process. This has incentivized
officials to borrow as much as possible, and to invest what they borrow in programs that boost the GDP.

The factor that adds a final layer of pessimism to the local debt problem is the declining ability of local governments to generate revenue through "land
financing," which is the local governments' largest income source that is free monitoring or intervention by higher-level authorities. The term "land
financing" refers to local governments' practice of appropriating land-use rights from farmers with low compensation and selling those rights at high
prices to real estate developers. In 2010, land financing interests made up about 35 percent of total public revenue for local governments. Because of the
significant role that land financing plays in local governments' fiscal muscle, it has a deciding impact on whether authorities are able to repay their
debts.

Unfortunately, as the urbanization process peters off and the State Council has issued a series of measures to cool down real estate markets, land
financing is no longer as profitable as it once was. As the audit report suggests, the debts that four provincial and 17 township governments promised to
repay with their future land finance income amounted to 54.6 percent of their total debts, yet their land financing income in 2012 declined by 8.8 percent compared to
2010. The weakening of land financing means that local debt is increasingly risky.

Unlike in the United States, where the federal and local governments have a closed fiscal system, fiscal responsibilities in China are transferable among
different administrative levels. When a local government is trapped in financial deadlock, the central government can come to its aid, instead of letting
it go bankrupt. This soft budget constraint not only makes fiscal risks permeable, but also eliminates the last obstacle that would prevent local
governments from borrowing beyond their ability to repay. Unless this soft budget constraint is hardened, the risks of local debt will continue to trouble
China.

Most Popular

A report will be shared with lawmakers before Trump’s inauguration, a top advisor said Friday.

President Obama has asked intelligence officials to perform a “full review” of election-related hacking, a top advisor told reporters Friday. The White House will share a report of its findings with lawmakers before Obama leaves office on January 20, 2017, she said.

Lisa Monaco, the president’s advisor for homeland security, made the comments at a Christian Science Monitor event. They were first reported by Politico and The Hill.

Last week, every Democrat (and a Democrat-aligned Independent) on the Senate Intelligence Committee called on the White House to declassify and release more information about Russia’s involvement in the U.S. elections. It’s not clear whether the review announced Friday is connected to the letter from the committee members.

Should you drink more coffee? Should you take melatonin? Can you train yourself to need less sleep? A physician’s guide to sleep in a stressful age.

During residency, Iworked hospital shifts that could last 36 hours, without sleep, often without breaks of more than a few minutes. Even writing this now, it sounds to me like I’m bragging or laying claim to some fortitude of character. I can’t think of another type of self-injury that might be similarly lauded, except maybe binge drinking. Technically the shifts were 30 hours, the mandatory limit imposed by the Accreditation Council for Graduate Medical Education, but we stayed longer because people kept getting sick. Being a doctor is supposed to be about putting other people’s needs before your own. Our job was to power through.

The shifts usually felt shorter than they were, because they were so hectic. There was always a new patient in the emergency room who needed to be admitted, or a staff member on the eighth floor (which was full of late-stage terminally ill people) who needed me to fill out a death certificate. Sleep deprivation manifested as bouts of anger and despair mixed in with some euphoria, along with other sensations I’ve not had before or since. I remember once sitting with the family of a patient in critical condition, discussing an advance directive—the terms defining what the patient would want done were his heart to stop, which seemed likely to happen at any minute. Would he want to have chest compressions, electrical shocks, a breathing tube? In the middle of this, I had to look straight down at the chart in my lap, because I was laughing. This was the least funny scenario possible. I was experiencing a physical reaction unrelated to anything I knew to be happening in my mind. There is a type of seizure, called a gelastic seizure, during which the seizing person appears to be laughing—but I don’t think that was it. I think it was plain old delirium. It was mortifying, though no one seemed to notice.

His paranoid style paved the road for Trumpism. Now he fears what’s been unleashed.

Glenn Beck looks like the dad in a Disney movie. He’s earnest, geeky, pink, and slightly bulbous. His idea of salty language is bullcrap.

The atmosphere at Beck’s Mercury Studios, outside Dallas, is similarly soothing, provided you ignore the references to genocide and civilizational collapse. In October, when most commentators considered a Donald Trump presidency a remote possibility, I followed audience members onto the set of The Glenn Beck Program, which airs on Beck’s website, theblaze.com. On the way, we passed through a life-size replica of the Oval Office as it might look if inhabited by a President Beck, complete with a portrait of Ronald Reagan and a large Norman Rockwell print of a Boy Scout.

Why the ingrained expectation that women should desire to become parents is unhealthy

In 2008, Nebraska decriminalized child abandonment. The move was part of a "safe haven" law designed to address increased rates of infanticide in the state. Like other safe-haven laws, parents in Nebraska who felt unprepared to care for their babies could drop them off in a designated location without fear of arrest and prosecution. But legislators made a major logistical error: They failed to implement an age limitation for dropped-off children.

Within just weeks of the law passing, parents started dropping off their kids. But here's the rub: None of them were infants. A couple of months in, 36 children had been left in state hospitals and police stations. Twenty-two of the children were over 13 years old. A 51-year-old grandmother dropped off a 12-year-old boy. One father dropped off his entire family -- nine children from ages one to 17. Others drove from neighboring states to drop off their children once they heard that they could abandon them without repercussion.

“Well, you’re just special. You’re American,” remarked my colleague, smirking from across the coffee table. My other Finnish coworkers, from the school in Helsinki where I teach, nodded in agreement. They had just finished critiquing one of my habits, and they could see that I was on the defensive.

I threw my hands up and snapped, “You’re accusing me of being too friendly? Is that really such a bad thing?”

“Well, when I greet a colleague, I keep track,” she retorted, “so I don’t greet them again during the day!” Another chimed in, “That’s the same for me, too!”

Unbelievable, I thought. According to them, I’m too generous with my hellos.

When I told them I would do my best to greet them just once every day, they told me not to change my ways. They said they understood me. But the thing is, now that I’ve viewed myself from their perspective, I’m not sure I want to remain the same. Change isn’t a bad thing. And since moving to Finland two years ago, I’ve kicked a few bad American habits.

Why did Trump’s choice for national-security advisor perform so well in the war on terror, only to find himself forced out of the Defense Intelligence Agency?

How does a man like retired Lieutenant General Mike Flynn—who spent his life sifting through information and parsing reports, separating rumor and innuendo from actionable intelligence—come to promote conspiracy theories on social media?

Perhaps it’s less Flynn who’s changed than that the circumstances in which he finds himself—thriving in some roles, and flailing in others.

In diagnostic testing, there’s a basic distinction between sensitivity, or the ability to identify positive results, and specificity, the ability to exclude negative ones. A test with high specificity may avoid generating false positives, but at the price of missing many diagnoses. One with high sensitivity may catch those tricky diagnoses, but also generate false positives along the way. Some people seem to sift through information with high sensitivity, but low specificity—spotting connections that others can’t, and perhaps some that aren’t even there.

Since the end of World War II, the most crucial underpinning of freedom in the world has been the vigor of the advanced liberal democracies and the alliances that bound them together. Through the Cold War, the key multilateral anchors were NATO, the expanding European Union, and the U.S.-Japan security alliance. With the end of the Cold War and the expansion of NATO and the EU to virtually all of Central and Eastern Europe, liberal democracy seemed ascendant and secure as never before in history.

Under the shrewd and relentless assault of a resurgent Russian authoritarian state, all of this has come under strain with a speed and scope that few in the West have fully comprehended, and that puts the future of liberal democracy in the world squarely where Vladimir Putin wants it: in doubt and on the defensive.

Democrats who have struggled for years to sell the public on the Affordable Care Act are now confronting a far more urgent task: mobilizing a political coalition to save it.

Even as the party reels from last month’s election defeat, members of Congress, operatives, and liberal allies have turned to plotting a campaign against repealing the law that, they hope, will rival the Tea Party uprising of 2009 that nearly scuttled its passage in the first place. A group of progressive advocacy groups will announce on Friday a coordinated effort to protect the beneficiaries of the Affordable Care Act and stop Republicans from repealing the law without first identifying a plan to replace it.

They don’t have much time to fight back. Republicans on Capitol Hill plan to set repeal of Obamacare in motion as soon as the new Congress opens in January, and both the House and Senate could vote to wind down the law immediately after President-elect Donald Trump takes the oath of office on the 20th.

The president-elect has chosen Andrew Puzder, a vocal critic of minimum-wage hikes and new overtime rules.

Updated on December 9, 2016

President-Elect Donald Trump announced Thursday evening that he picked Andrew Puzder, the CEO of CKE Restaurants, which owns fast-food chains Carl’s Jr. and Hardee’s, to lead the U.S. Department of Labor. Puzder—like several of Trump’s other nominees—is a multi-millionaire and Washington outsider who served as an adviser and fundraiser during the presidential campaign. While there’s no political record to indicate how Puzder thinks about the labor market, his remarks as a business executive give some indication of the stances he’ll take on several important labor issues.

If confirmed, Puzder will likely take a pro-business, anti-labor, approach to steering the federal agency tasked with protecting American workers and their jobs, which clashes with Trump’s populist campaign message of fighting for blue-collar workers. Puzder has been a vocal defender of Trump’s economic policies, including lowering the corporate-tax rate, and has opposed Obamacare and certain business regulations, such as a higher minimum wage. Puzder has argued against raising the minimum wage and offering paid leave and health insurance to employees. Efforts to increase the minimum wage, he writes, will hurt everyone, especially low-skilled workers, because “businesses will have to figure out the best way to deal with the high labor costs.” Those changes, he says, will lead to price increases, more efficient labor management, and automation.

Trinidad has the highest rate of Islamic State recruitment in the Western hemisphere. How did this happen?

This summer, the so-called Islamic State published issue 15 of its online magazine Dabiq. In what has become a standard feature, it ran an interview with an ISIS foreign fighter. “When I was around twenty years old I would come to accept the religion of truth, Islam,” said Abu Sa’d at-Trinidadi, recalling how he had turned away from the Christian faith he was born into.

At-Trinidadi, as his nom de guerre suggests, is from the Caribbean island of Trinidad and Tobago (T&T), a country more readily associated with calypso and carnival than the “caliphate.” Asked if he had a message for “the Muslims of Trinidad,” he condemned his co-religionists at home for remaining in “a place where you have no honor and are forced to live in humiliation, subjugated by the disbelievers.” More chillingly, he urged Muslims in T&T to wage jihad against their fellow citizens: “Terrify the disbelievers in their own homes and make their streets run with their blood.”